Abstract
In Taiwan, many severe land subsidence areas are mostly caused by aquaculture farmers’ over-pumping groundwater. Therefore, to slow down the situation of subsidence, we should regulate the use of groundwater. Using Da-Cheng township as an example, this study tries to analyze how a proposed block tariff system on groundwater use might affect the aquaculture farmers’ profits and behavior. The research not only offers the farmers an optimal decision making framework but also provides our government useful policy implications on how to adjust the block tariff system. Our empirical results show that the current proposed water tariff rates will only cause some small farmers reduce their groundwater use. In order to reduce the farmers’ dependence on the groundwater, the government should consider raise the rates on higher groundwater use blocks. Doing so would significantly lower the amount of groundwater extraction. In addition, adjusting the tariff rates at higher blocks only affects a very small portion of farmers in this area. This will in turn make the regulation policy more feasible.